Statutory compliance

This query is : Resolved

CA.Balakrishnam.V

CA.Balakrishnam.V (Querist)
Follow

14 December 2009 Can the share application money be received in form of kind? Do the following entry is correct?

ADVANCE TO CREDITORS a/c Dr
to SHARE APPLICATION MONEY a/c.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
Follow

14 December 2009 Share application money can be received in cash.

But in case of IPO/Right Issue etc., now-a-days; these are received by account payee cheque or demand draft only.

The entry will be:-

Cash or Bank a/c Dr
To Share Application A/c

CA.Balakrishnam.V

CA.Balakrishnam.V (Querist)
Follow

19 December 2009 Can the share application money be received in form of kind? Do the following entry is correct?

ADVANCE TO CREDITORS a/c Dr
to SHARE APPLICATION MONEY a/c.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

25 July 2025 Regarding your question on **receiving share application money in form of kind** and the journal entry:

---

### Can share application money be received in form of kind?

* **No, share application money is normally received in cash or cash equivalent** (cheque, demand draft, electronic transfer).
* The Companies Act and SEBI guidelines specify share application money should be received in **cash or by bank transfer**.
* **Receiving shares against non-cash consideration (like assets or kind) is considered as a subscription by way of allotment and treated differently** under the Companies Act.
* For allotment against assets or kind, there are separate procedures involving **valuation reports, board approvals, and disclosures**.

---

### Is the entry correct?

> Advance to Creditors a/c Dr
> To Share Application Money a/c

**No, this is incorrect.**

* Share Application Money is a liability or equity-related account representing money received from applicants for shares.
* **Advance to Creditors** is an asset account representing money paid in advance to suppliers.
* If you receive share application money, the correct entry is:

```plaintext
Bank or Cash A/c Dr
To Share Application Money A/c
```

---

### Summary:

* Share application money **cannot** be accepted as goods or kind directly.
* If shares are issued for non-cash consideration, it is handled as **allotment against consideration other than cash**, with proper valuation.
* The journal entry you proposed is **not correct**.

---

If you want, I can guide you on how to account for shares issued against non-cash consideration (like assets). Would you like that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now